Amazon’s European Base Luxembourg Sued by EU on E-Books Tax

Feb. 21 (Bloomberg) -- Amazon.com Inc.’s European base of
Luxembourg as well as France face European Union lawsuits over
their low value-added tax rates for e-books, which the EU claims
hit sales elsewhere in the 27-nation bloc.

The European Commission is suing both countries in the
European Court of Justice for breaching rules that ban reduced
VAT rates for e-books, the regulator said in a statement today.
Luxembourg charges 3 percent VAT on e-books and France 7
percent. The commission said they should charge the standard
rate -- 15 percent in Luxembourg and 19.6 percent in France.

The low rates are hurting sales of e-books in other EU
countries and creating “serious distortions of competition,”
the Brussels-based authority said.

Amazon has its European headquarters in Luxembourg,
allowing the world’s largest retailer to charge 3 percent on e-book sales. VAT rates on other items are charged in line with
tax rates in customers’ home countries. Finance ministries and
publishing industry groups have complained to the commission
over “the negative effect on sales on their domestic markets”
the low tax rates have, the commission said in the statement.

Luc Frieden, Luxembourg’s finance minister, said his
government was pleased the EU’s highest court will rule on the
issue.

“We actually welcome the decision to send the case to the
EU Court of Justice so the court can tackle the question whether
we have a modern Europe that supports e-commerce or whether it
wants to punish e-commerce,” Frieden said in a telephone
interview today. “This is a very important question for the
future of Europe.”

Amazon’s press offices in the U.K. and the U.S. didn’t
respond to calls and e-mails seeking comment. France’s finance
ministry didn’t immediately respond to a call seeking comment.

As part of a revamp of Europe’s VAT system, the commission
plans to make proposals by the end of the year to overhaul the
different tax treatment of e-books and printed books. Any new
rules would take effect in 2015, it said.